Tuesday 25 June 2019

Mortgage lenders to impose spate of rate hikes

300,000 mortgage holders will be hit with rises within weeks

Charlie Weston

Charlie Weston

A STRING of lenders are going to hike interest rates on mortgages within weeks, the Irish Independent has learned.

Up to 300,000 people will be hit by the increases by the end of August.

This move follows EBS's announcement last Friday that standard variable rates for new and existing customers will jump by 0.6pc in early August.

Families face paying an extra €100 a month in repayments on a €300,000 mortgage. This works out at €1,200 a year.

Now AIB, Bank of Ireland, Permanent TSB and Irish Nationwide are expected to raise their rates by around 0.5pc, with indications yesterday that most of the increases will be introduced by the end of August.

Permanent TSB and EBS have now upped their variable mortgage rates twice in the past year -- pushing up rates by 1pc.

Most other lenders have only moved once, and are now preparing to act quickly to push up their variable rates again.

Earlier this month, the European Central Bank (ECB) left its key interest rate unchanged for the 14th month in a row. But mortgage lenders are free to hike standard variable rates whenever they want to, irrespective of what the ECB does with its rate.

And once this next round of mortgage-rate hikes is completed, lenders are set to go again before the end of the year.

This would mean rates would have risen by 1.5pc in total this year.

A family with a €300,000 mortgage would see monthly repayments shooting up from €1,227 at the start of this year to €1,470 by December. That works out at an increase of €243 in monthly repayments, or almost €3,000 over a full year.

A jump of €3,000 represents more than a month's salary for a single-income family on €43,500 a year.

Hikes will not impact on those with tracker mortgages, which can only move when the ECB raises its rates. But up to 300,000 homeowners, out of a total of 792,000 residential mortgages, are on standard variable rate mortgages.

Spokesman for the Independent Mortgage Advisers Federation, Michael Dowling, said: "Other lenders will follow EBS before the month is out."

Mr Dowling added that the lenders that had received injections of capital from the State had told the EU that they would push through increases totalling 1.5pc in standard variable rates this year.

The EU is assessing the restructuring plans of AIB, Bank of Ireland, EBS and Irish Nationwide to see if they breached rules on state aid within the EU.

"Once this latest round of increases is out of the way there will be another round of rises to take the overall increase to 1.5pc before the year is out," he added.

Chief executive of the Consumers' Association Dermott Jewell said mortgage lenders were preparing to hit homeowners with a "a rollout of mortgage rises".

He accused banks and building societies of trying to lessen the impact of the bad news by announcing a series of small increases, separated by a few months each time, rather than one big rise.


Contacted yesterday, Permanent TSB, AIB, Bank of Ireland, Irish Nationwide, KBC Homeloans and Ulster Bank all said they had no immediate plans to hike standard variable rates, but stressed that the rates were under constant review.

However, the Irish Independent understands that at least four lenders -- AIB, Bank of Ireland, Permanent TSB and Irish Nationwide -- are set to move quickly to raise their mortgage rates.

Karl Deeter, of Irish Mortgage Brokers, said these lenders were set to hike rates within weeks.

Frank Conway of the Irish Mortgage Corporation said lenders were taking their cue from each other and once one moved on rates, others followed.

In the past, banks have tried to deny plans for immediate interest rate hikes -- but then increased their rates within weeks.

Irish Independent

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